Capital Gains Calculator

When you sell an investment for more than you paid in a taxable account, the profit is a capital gain — and how long you held it decides the rate. Sell within a year and it's a short-term gain, taxed at your ordinary income rate (up to 37%). Hold longer than a year and it becomes a long-term gain, taxed at the preferential 0%, 15%, or 20% rate. Crossing that one-year line can roughly halve the tax on the same profit. But there's a second, quieter cost that catches even people who know the rates: every time you sell, you trigger the tax now instead of later — and tax paid now is money that stops compounding for you. A buy-and-hold investor defers all of it until the very end, so the gains the government would have taken keep earning returns the whole time, like an interest-free loan. Frequent trading — 'churning' the portfolio — pays both penalties at once: the higher short-term rate and the lost compounding from realizing gains early. At a $25,000 investment growing 8% a year for 30 years, never selling until the end and paying the long-term rate leaves about $218,000 after tax; churning the whole portfolio every year at the short-term rate leaves only about $147,000 — more than $70,000, nearly a third of your after-tax wealth, handed to the IRS purely because of when and how often you sold. Crucially, this is a taxable-account story: inside a 401(k), IRA, or HSA, selling triggers no tax, so trading there is free. The durable lessons: in a taxable account, hold winners at least a year before selling, trade as little as your plan allows, and keep high-turnover strategies inside tax-sheltered accounts — and never let the tax tail wag the investment dog by clinging to a bad holding just to dodge a bill.

Free and interactive — no sign-up, nothing to install. Read the full lesson for the plain-language explanation.